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Comment by dogma1138 | Hacker News Reader

Luxembourg has a 29% corporate tax rate the 4th highest in Europe. This isn't Liechtenstein, Ireland or Estonia... Unlike Ireland Luxembourg also did not hand out tax credits.

Shell paid less than 1 bln US in tax last year in the EU, and less than 5 bln US globally, and overall it's by far much more subsidized than Apple or Amazon, the difference being it's a European corporation.

Most of not all of the largest European corporations excel at Tax avoidance, in fact they are the ones Google, Apple and Amazon learned the tricks of the trade from, heck the EU was just fine establishing tax heavens for their own corporations and canonizing them in EU law as long as they are the ones benefiting from them.

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> Unlike Ireland Luxembourg also did not hand out tax credits.

This seems to be contradicted by the story itself:

"Luxembourg gave illegal tax benefits to Amazon. As a result, almost three-quarters of Amazon's profits were not taxed," Ms Vestager added.

She said Amazon paid four times less tax than other local companies.

You should read the actual source. Amazon paid normal tax rates on trade goods, it paid the lower tax rate on IP derived revenue such as AWS and several other digital services the deal wasn’t any different than what EU companies in Europe get including OVH. The difference is that Amazon like many other US tech companies have substantial revenue from IP and licensing while EU companies still rely on trade goods and services. This isn’t a court ruling like with Apple there is more than a good chance that this will not hold in the high court. Likely even better since Amazon didn’t get direct tax subsidies.

This is the actual source http://europa.eu/rapid/press-release_IP-17-3701_en.htm

And it says

> The tax ruling enabled Amazon to shift the vast majority of its profits from an Amazon group company that is subject to tax in Luxembourg (Amazon EU) to a company which is not subject to tax (Amazon Europe Holding Technologies) [...] the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality.

IANAL, but I am not sure why you interpret this as different from Apple's. They both depend on the arbitrariness and non-generality of a company-specific tax ruling.

Here is Apple's appeal.

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX...

> They both depend on the arbitrariness and non-generality of a company-specific tax ruling.

Thats an opinion not a fact. The case has yet to begin in court.

IMO Apple did not get any special treatment. Basically all you need is a country like Ireland where an onshore incorporated become non-resident if controlled offshore [1]. And Ireland must be not be considered as tax haven [2] by USA [3] otherwise Apple Sales International would be taxed as per USA laws whether Apple USA repatriates or not.

[1] This was true until 2015.

[2] IIRC Ireland must be considered tax-fair country. Obviously a more strict condition.

[3] Now here Ireland enjoy the benefit of single USA-EU tax treaty.

> Thats an opinion not a fact

sure, but it's the opinion of the EU. The same applies in Apple's case, it also is the opinion of the EU, and might be reverted in court.

My comment was only about the fact that they are the same thing, there is no major difference between the Apple and Amazon case.

Licensing IP is the weapon of choice for modern tax evasion. Estimating costs of goods and services is relatively easy for tax authorities, there are detailed rules and so on; but IP is so vague that it can be easily abused. It's the same story with Starbucks and so on.

> there is more than a good chance that this will not hold in the high court.

That is very unlikely. The Commission tends not to act directly unless they are absolutely certain that the case is extremely clear and they have ticked all boxes. This is because these actions have, obviously, huge political repercussions; Commissioners, at the end of the day, are politicians who have been entrusted to be somewhat above the fray and to look out for the whole continent, so they usually don't want to be accused of partisanship (there are always exceptions, of course; but the culprits tend to pay a heavy price in the end). The act itself is basically a statement that they have a great deal of proof. You won't find many people who know European legislation better than EU staffers themselves, so when they act on it, it's very unlikely they will lose a legal confrontation.

EC is not just disagreeing with Apple's legal team but Ireland Govt (IG). Arguably IG is atleast as competent as EC if not more. And then not to mention 3rd parties such USA Treasury.

I dont know how EC can justify (in court) violating non-retroactivity traditions/laws.

> Arguably IG is atleast as competent as EC

That's why the Commission rarely acts in such a direct manner - they know they are talking to very powerful interests. But again, in most cases, when such procedures are invoked, national governments are eventually found in violation. Nobody enjoys victimizing a member state, they only do it when infractions are so egregious that they cannot be ignored.

> violating non-retroactivity traditions/laws.

If you don't pay taxes in 2012 and the state sues you in 2014, as long as the statute of limitations allows it, there is no retroactivity. The Commission only started to actively investigate these arrangements recently, but the relevant laws have been on the books (or rather in the treaties) for a very long time. Just because a policeman doesn't arrest you for beating your neighbour doesn't mean you're not breaking the law.

http://www.investopedia.com/ask/answers/100115/why-luxembour... suggests that the basic rate is 21%? and http://www.grantthornton.lu/online/www/navMain/publications/... suggests the rate is currently falling

Also has some other pointers about why Luxembourg is considered a tax haven...

http://www.grantthornton.lu/online/www/navMain/publications/...

It’s being reduced to 27 from 29, your figures don’t count in CIT.

One corporation doing something morally wrong and getting away with it doesn't excuse another company for doing the same. "He did it first" doesn't work on the playground and neither should it work in corporate law.

There's nothing morally wrong with reducing one's tax burden to the extent that is legally permissible. From Judge Learned Hand: "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands"

I agree and disagree. For the individual, looking only after their own affairs, it is fine to reduce one's tax burden as far as legally possible. The citizen, looking the health of their society, has to take a wider view and consider if the existing tax laws and enforcement is contributing to a better or worse society.

The specific ruling that was posted seems to be that Amazon and Apple acted illegally and hence are liable for back taxes. The wider point is what OP was making, by my reading, and which the comment I replied to was refuting.

> The citizen, looking the health of their society, has to take a wider view and consider if the existing tax laws and enforcement is contributing to a better or worse society.

This is very important in deciding to pay taxes at all, and highly salient for people trying to impact tax legislation.

In terms of tax _burden_, though, it's quite odd to do anything but minimize taxation, and the extent of minimization cannot be extrapolated to social health or social costs.

The primary mechanism the government has to shape the economy is through taxation. It's not just transferring cash to the collective public coffers, there are specific reasons the government wants or doesn't want certain kinds of spending and certain kinds of economic relationships. You get a mortgage deduction because house ownership has perceived social benefits, for example. You get write offs for specific programs, or kinds of spending the gov wants to encourage. By ignoring the relevant tax-regime you are also ignoring the economic directives of your elected government.

At the same time: overpaying on your taxes is a highly inefficient way to do just about anything. Send post-tax cash to the DOD, NHS, charities, political parties, or to Lockheed-Martin directly, if you're so inclined. This will always yield more direct impact then indirect funding through government taxes.

Legal tax minimization is good for the economy and lets capital move 'intelligently' towards desired outcomes. It lets legislators shape the cradle-to-grave picture while maintaining representational control. Illegal tax minimization is criminal :)

Aah, yes, those crafty poor with their Dutch sandwiches, accounts in the Caymans and Switzerland, and their tax-shelter charities.

This quote sounds almost ironically similar to this quip from Anatole France: The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.

Well there's an income spectrum in society beyond 'the rich' and 'the poor' but certainly our poorest citizens reduce their tax burden as much as possible as well. When was the last time someone working for cash under the table declared their income?

While that's true, it's also a simplistic take on taxes.

The mega-rich, including corporations, work with the government (bribery, oops, I mean campaign donations) to ensure there are loopholes in place to avoid taxes.

While the average citizen can attempt to minimize his obligation, he has very little opportunity to do so. In the US, most people (about 60%) do better taking the standard deduction vs itemizing their deductions.

If we continue down the path with this logic, shouldn't citizens who don't find themselves below or near the poverty line and support increasing the role of the government skip the standard deduction to increase the rate of tax they pay? After all the standard deduction was only added to garner middle class votes and is thusly "immortal lobbying" of a sort.

Possibly. But, the size of government, and the relative tax rates needed to fund it, is a different discussion than tax breaks that are only available to the wealthy.

>There's nothing morally wrong with reducing one's tax burden to the extent that is legally permissible.

Yes there is. It may not be legally wrong, but it sure is morally wrong. What matters is the spirit of the law. The fact that big corporations can hire squads of lawyers and search and identify loopholes that allow them to pay outrageously low taxes on outrageously high revenues doesn't make it morally acceptable, even if they technically are following the letter of the law.

Add to that the fact that these loopholes and exploits are kept in place by fierce (and expensive) lobbying efforts from those very same companies and people.

> It may not be legally wrong, but it sure is morally wrong.

Ah now. Governments don't just use taxes to raise revenue, but also for incentives. If they tax moving cash abroad to help with the balance of payments and you restructure your company to avoid doing this then everyone is happy. It doesn't excuse manipulating the government to make favourable tax laws however.

For it to be morally wrong to reduce one's tax burden, I suppose you believe that corporations, big or otherwise, are morally obligated to pay higher taxes than legally required. Why?

> There's nothing morally wrong with reducing one's tax burden to the extent that is legally permissible.

Disagree.

Legality does not equate to morality.

It seems to me that the dispute here is between the EU and its member countries and not between the EU and Amazon, Apple, etc.

I generally disagree with the creation of special tax deals between governments and individual businesses, but it is the government that I disagree with, not the businesses for optimizing their tax burden.

'....Luxembourg’s role in orchestrating tax avoidance deals for hundreds of global companies was revealed by the Guardian in 2014, raising questions about tax policy in one of the EU’s oldest member states.

The case continues to hang over Jean-Claude Juncker, the European commission president, who served as Luxembourg’s prime minister from 1995 to 2013, and acted as finance minister for much of that period..... '"

The point is they get backroom deals.

https://www.theguardian.com/business/2014/nov/05/-sp-luxembo...

Why do so many companies are there if it is not for taxes?

Every large corporation regardless where they are from are try to get out of paying taxes in EU and it is great they are hunted. Many of them have been under EU tax crackdown and many more are to come.

For the same reasons as Delaware, the legal framework and establishment are favorable but there is nothing criminal in this.

As for the second parts it’s every large non-EU corporation and that is the problem.

These acts as well as the anti trust investigation into Google and other such affairs is a protective response to the lack of competitiveness from EU corporations primarily in Tech.

Tax avoidance in the EU isn’t an oversight it’s a deliberately orchestrated and legislated ordeal which was established to favor EU corporations.

Since the EU seemed to nearly skip the tech giant bubble and it’s largest corporations are primarily ancient energy and finance giants it now goes after US corporations which have subsidiaries in the EU.

This is selective enforcement the EU didn’t go after Lidl which keeps much of its Tax books private it didn’t go after BNP, Shell, ING and the like all of which also excel at not paying.

> For the same reasons as Delaware, the legal framework and establishment are favorable but there is nothing criminal in this.

What you omit is that it is favorable because there is no income tax [1]: "Delaware charges no income tax on corporations not operating within the state, so taking advantage of Delaware's other benefits does not result in taxation."

European companies cannot incorporate in Delaware. If they would, they'd fall under US law.

Now, if the United States of America wishes to keep legal frameworks like these intact that is mostly the loss of all of the US citizens, although also a problem for competition due to lower prices.

You are deceiving when you claim Shell is paying no tax. I have a Dutch source with data saying they paid 10 billion in 2010 in The Netherlands [2].

I don't know if this fair or not, but I want to state that the EU needs to go after every company which is avoiding paying tax. That said, they should go after the biggest and easiest fish first.

> Tax avoidance in the EU isn’t an oversight it’s a deliberately orchestrated and legislated ordeal which was established to favor EU corporations.

Pot, meet kettle. AFAIK, no EU corporations follow the Irish-Dutch construction.

Starbucks, for example, had to pay back money as well. If you want to do business in the EU, you're going to pay income tax. Simple.

> This is selective enforcement the EU didn’t go after Lidl which keeps much of its Tax books private

Lidl is not keeping its tax books in UK private anymore since 2014 [3].

For completion, here's a list of companies following the double Irish with a Dutch sandwich construction [4].

[1] https://en.wikipedia.org/wiki/Delaware_General_Corporation_L...

[2] https://www.nu.nl/beurs/2795797/shell-draagt-10-miljard-af-o...

[3] http://www.bbc.com/news/business-28416081

[4] https://en.wikipedia.org/wiki/Double_Irish_arrangement#Compa...

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